The market has crashed!  The Zombie apocalypse has happened!  Life is ending!  Who gives a #?@! about investing and financial independence?

I would ask is there a better or more important time to take control of your finances?


What do you do in uncertain times? You don’t panic that is for sure!

If you finances weren’t in a good state when Covid hit this situation probably did nothing to help.    So many business and families lost their income overnight and they weren’t prepared for it!

The people that benefit the most from the opportunities arising from Covid19 are the ones that are in the best financial position.

​Now is the time to take control of your finances and set yourself up for the future

Disclaimer: This is not financial advice.  Katie and I are not trained financial advisors, nor to we pretend to be one online.  Read our full disclaimer here

Panic; sell; the market is collapsing!

In February and March 2020 the markets nosedived as the world changed because of Covid19.  Businesses closed, unemployment went up and uncertainty about the future increased.

Katie and I watched as our investments fell dramatically losing £186,000 of our net-worth in those two months.   It was and still is crazy times.

Do you think we panicked?  Do you think we sold off all our stock and reacted quickly? Do you think we noticed?

After years of training from the financial independence community we knew what to do in these dramatic times.  Chill, turn off the news, make a protein smoothie and focus on your health.  I added the protein shake bit, they didn’t teach us that bit!

The news and the panic in the media is not going to help you stay sane. If we had reacted by tuning into the media, reading the reports, staring at our plummeting net-worth we might well have gone mad!

The Godfather of Financial Independence JL Collins, Mr Money Mustache and Kristy and Bryce Millennial-Revolution have all drummed it into us that you don’t sell and panic you relax and take it easy.  You NEVER sell.

One of JL’s tenants of financial independence is that over time the market always goes up.  All you have to do is relax and wait for it to recover.  So that is what we did and in the last month almost all of the value we had lost has recovered.  Our net-worth has healed.

This doesn’t mean it isn’t going to collapse again in the future but it does mean that over the long term the market always bounces and goes up.

The only way you make a loss is if you sell and lock in that loss.  If we had panicked and sold as the market had crashed we would have lost hundreds of thousands of pounds (for you Americans that is a metric tonne of dollars!)

Instead we worked on our fitness and waited for the market to come back up.  We aren’t going to sell.  We are going to trust that the world will find a way of recovering and pushing on.

Step 1: Don’t panic, chill and ignore the crash

Everything is on sale

The interesting thing is that as the market collapses as the value of stocks and shares goes down that means you can buy them for a lot less!

The market dipped by 20% during this pandemic.  Do we care?  From a net-worth perspective no.  From a buying point of view yes!  Stocks and shares are on sale!  YAY

Your money can buy you 20% more than it did a month earlier and expedite your time to financial independence.

I want you to see future stock market crashes as opportunities to buy not the end of the world.

Next time the market crashes I want you to think “Yay, everything is on sales!”

Step 2: see market crashes or corrections as opportunities to buy and invest

Never do this if you are in debt.  Deal with debt first and then invest second.

Investing for the long term

Our investment strategy is a long term one.  We are buying broad based index funds (here is the one we actually buy) and hold them FOREVER.

We aren’t trading in and out of the market.  We aren’t buying and selling.  We aren’t timing the market.  We buy the index fund and then we hold it forever!

Our plan is to live off the dividends and maybe sell a small amount each year so that we live off 4% of the total value in our retirement or draw down phase.   If you want to know what the 4% rule is then read this article. 

If you are buying and holding FOREVER then what are you going to do when the market crashes?

Nothing with your existing stocks and shares.  The only action you might take is buying some more as Stocks and Shares are on sale!

Step 3: have the proper time horizon in mind when making decisions

Lock-Down your wallet

Uncertainty in the economy and the world brings uncertainty for all of us individually.  We don’t know if our jobs are going to be around in 3-6 months, we don’t know what is going to happen next in the economy and as such future income is left in question.

In moments of uncertainty like this it is not the time to increase your consumer spending.  It is time to put your wallet on lock-down.    Stop spending.

I am always amazed at the Facebook posts at a time like this of people next to their new cars, or having spent thousands on having the house remodelled.    If life is uncertain then take it easy on the spending and keep your emergency fund in tact.

If you go spending big and you are forced to sell your assets at a time like this when the market is down you are in trouble!

One of the positive side effects of this pandemic is that our spending has gone down massively!  We haven’t been going out to eat, we haven’t been to the cinema and we haven’t been travelling!  We have saved a fortune.

​This means that I have a good emergency fund, I am not at risk of digging into my reserves or selling an asset when I don’t need to.

Where can you reduce your spending?

​Step 4: Lock down your wallet!  

Alan Donegan with an empty wallet outside the bank

Put your wallet or purse away! Otherwise it will end up empty! Lock it down baby!

Volatility versus risk

in 2016 Katie and I travelled to Ecuador to go to a financial retreat called Chautauqua.  There we met JL Collins the author of the Simple Path to Wealth.  I was blown away by his talk and how he was able to explain investing to me in such a simple way.

For years I had been scared of investing in the stock market because it felt like gambling to me.  I lost a lot of money in the stock market in 2001 and the dot com bubble and I never wanted that to happen again.

One of the biggest points JL gave me was risk versus volatility in the stock market.

Volatility (noun)
liability to change rapidly and unpredictably, especially for the worse.
“the succession of new rulers contributed to the volatility of the situation”

In finance volatility means the range of prices that something trades for and the variance between the low and high.

A stock is volatile if it goes up and down a lot.  There is a large gap between the low price and the high price and this changes a lot.

The stock market goes up and down a LOT!  This year alone it dove by 25% with the Covid Pandemic and then has recovered almost to the highs of January already!  This is  lot of volatility.

This is different to risk.  Risk is the chance of something happening (usually bad).

What is the risk of another market crash coming in the future?  I would say it is 100% there is always going to be another crash; that is the nature of the beast!

Risk is the likelihood of something bad happening which in finance is mostly defined by you and I losing money.   What’s the chance I will lose money in the stock market?

Well that is an interesting question.  The answer is that it depends on the time frame you are investing for.    It you are investing over a 10+ year period then the chance (risk) of you losing money is very, very small as historically the stock market has always gone up over the long term.

There will always be another crash, another panic or more uncertain times.  Things can be volatile which is different to risky.

​Step 5: Don’t respond to volatility, assess risks over the long term

The loss isn’t real unless you sell

Let’s imagine you own a rental property.  You have tenants that have good jobs and the property is rented out.  If the property market drops and the value of your rental property goes down by 20%, maybe £40k, have you actually lost any money?

If the property is rented out and you can just wait for the market to rise again those losses never happened because you didn’t sell the property.  You only crystallise the loses when you sell.   If you panic and sell the property then you get the loses.

It is the same with index funds.  If the market tanks and they go down in value  you haven’t actually lost anything unless you sell.   You don’t realise or crystallise the losses until you sell.

We have recently been through a crazy time in the market with the Covid-19 crash and rebound.    In the chart below you can see the fund that Katie and I mainly invest in which is the Vanguard Developed World excluding UK.

In the middle of the chart is the Covid market crash and as you can see the market has rebounded very strongly since.

As the market was dropping by 25% at the height of the pandemic and the media were screaming the end of the world; it would be really easy to lose your nerve and sell!

Katie and I lost £186,000 from the top of the market.  But those loses were only real if we sold.

We didn’t panic.  We turned off the media, stopped reading the paper and looking at the market figures.  We focused on our health, happiness and being productive together and let the market rebound.

Nearly the entire losses have been regained in the 3 months since the pandemic started and out net-worth has pretty much returned to where it was.

The loses are only real if you are going to sell.  We aren’t ever planning on selling.  We have bought this index fund to hold forever.  We will live on 4% of the total value each year but we will never sell it.

If you want to know what the 4% rule is and how it ties into all this stuff then read this article I wrote on “How much do you need to retire”

The danger in these situations comes if you are forced to sell when the market is down.  If you have to sell when it is down you are in trouble!  That is why we keep an emergency fund of cash available so that we can wait this kind of thing out without ever selling.

​Step 6: Have an emergency fund so you don’t have to sell at a bad time

You can’t time the market

In 2016 Katie and I has saved a lot of cash.  We were worried about investing the money into the stock market.  Brexit was on the cards and Donald Trump was being voted for by the Americans.

I felt like Brexit would cause a down turn in the UK market and that if Trump got in then there would be all sorts of chaos in the states and the markets would tank there as well.

Shows what I know!!!  In both situations the market did the exact opposite of what I expected.

After Brexit the pound tumbled in value against the euro which meant that the majority of FTSE companies, that operate around the world, sales increased in value. The market went up!

After Trump got elected the market’s around the world saw sharp increase as they realised Trump was good for business and would reduce regulation and create favourable conditions.

What’s the motto of this story?  Don’t trust Alan?  Maybe

The motto of this story is that it is REALLY hard to predict what the market is going to do in the future.  No one has ever been able to predict the market correctly over the long term.  If they had they would be worth many more times than Warren Buffet!

None of us have a crystal ball.

I am saying don’t bother trying to predict the market.  You don’t know if it is the bottom of the market, the top of the market or what way it is going to head next.  Don’t even try and do it.  Use your money to buy low cost index funds and hold them forever.

This strategy means you don’t have to waste your time trying to predict the market you can get on with actually living life!

​Step 7: you can’t predict the future.  Don’t try. 

Look after your future

Current Katie and Alan are VERY grateful to past Katie and Alan who saved, invested and really took care of their money.

Past Katie and Alan put us in an incredible situation with a full emergency fund and great assets.  They really looked after you.

Current Katie and Alan are also thinking about future Katie and Alan.  I am 41 currently and I want 50 year old Alan, 60 year old Alan and beyond to be in a good position.

I am doing what I can to make sure I look after my future self.

Take care of your future self by getting your finances in order.  Pay off your debt, start saving an emergency fund and learn about investing.

​Step 8: Look after future you by doing the right things now

What do do in uncertain times?

There are a few difference to normal times but in general good financial sense is the same in up times and down times.  Don’t spend more than you earn.  Save for a rainey day.  Don’t get swept away by the media and the hype and look after future you!

What’s next

Katie and I have a few plans coming up!  We have been coaching a couple we met on finances and have really enjoyed it.  We have been helping them take control of their finances and this has inspired us to want to do more.

So our plan is that we are going to run a finance course together.  We have started working on the format and content and we want to share everything we have learnt on our FI journey with you.  We want to make it easier and quicker for you than it was for us!

If you would like to know about the finance course then just sign up to the mailing list below and I will email you details as soon as it is ready.  If you know someone that needs help with their finances then send them our way and we would love to help.

Finances and money is sometimes a mystical and difficult thing and we want to change that.  We want to help you understand money, finance and investing and help you take control of your economic future.

More to come……………

Stay safe.  Have fun.  Remember you build your world.



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